It is likely to be one of the largest purchases of your life, and it can be extremely nerve racking and overwhelming. Buying a new home! Whether you are buying your first home, or moving to a new home; purchasing a home and shopping for home loans is a major decision that requires a lot of time and energy. Where Do I Start? If you are shopping for a new home and a home loan for the very first time then you may become very overwhelmed very quickly if you do not take it slowly. The first thing that you should do is start researching your options. Collect all of the financial information that you have and approach your bank. A good place to start is with the financial institution that you do most of your banking with. You have likely built up a reputation and perhaps a relationship with your bank and that will help when you are trying to get a loan. You will have to gather together all of your financial information including: * Pay stubs
* Proof of other income sources
* Car payment records
* Other debt information
* Savings and investment information Your financial institution should be able to determine from the information that you bring in what type of a mortgage you qualify for. The bank or financial institution will also pull a credit report for you to see how your credit looks. Should I Only Visit One Bank? No, definitely do not stop shopping for a mortgage after visiting only one financial institution. It is definitely a good idea to shop around for the best mortgage rate. Different institutions may offer you different payment options and lower interest rates. If you have poor credit, then you may want to talk to a mortgage broker who will likely be able to offer you some options that you can afford. Get Pre-Approved From Your Bank Before you even go out house hunting it is a good idea to get a pre-approval from your bank or financial institution. This process will take a little bit longer, but it will pay off in the end because you will know exactly what price range to look at when you are house shopping. Another benefit to being pre-approved is that when you find a home that you are interested in, if the seller is in a hurry to sell, they will often go with a buyer who has been pre-approved because it is a sure thing. What About The Interest Rate? It can be overwhelming when you go to get your home loan; there are so many decisions that have to be made. Do you want a variable interest rate or a fixed interest rate? How do you decide? Your decision will likely depend on a number of factors in the market place, most importantly, what the interest rate is at the time that you get your home loan. In the past few years, the market has seen a sharp decrease in interest rates. In fact, some of the lowest rates in history have been experienced in the last few years. If the interest rate is quite low relative to the last few months when you apply for your home loan, than you may want to consider locking into a fixed rate mortgage. That way, even if the interest rate climbs in the future, you will be guaranteed the same low rate that you signed on. However, if you think that the interest rates are still likely to fall then you may want to sign in on a variable interest rate home loan. That way if the interest rate falls, you can still take advantage of the new lower rate. You will want to check with your lending institution on the variable rate home loans that they offer, as they do differ greatly. What Term Length Should I Choose? Another big decision when you apply for and sign onto a home loan is the term of the loan. This is a very important decision because the length of the loan will determine how much interest you will pay over the term of the loan. There are a few ways to look at this problem. If you require low monthly payments than you may want to choose a longer term loan, such as a 25 year or a 30 year term instead of a 15 year term. If you extend the term of your loan, then your monthly payments will be lower, however in the long term you will be paying more interest. If you are in a situation where you are able to handle slightly larger monthly payments, then you will be paying off the principal of your home loan much faster, and not paying as much interest. Are There Other Ways Of Paying My Loan Off Faster? Most types of loans will allow you to make balloon payments at least once a year. A balloon payment is where you can pay directly on the principal of the loan, so you are not paying any interest. This is an excellent way to reduce the principal of your loan. And if you are able to make balloon payments, they are worth it. So Now What? When you are ready to start shopping for a home loan, whether it is your first or your second, remember to do your research. A good place to start is with a mortgage calculator. You can find a mortgage calculator on the internet. This is an excellent tool to help you make some of the tougher decisions about your mortgage. But there is no replacement for discussing your individual case with a financial institution. Just remember to shop around before you decide which home loan is right for you. 2005 http://www.home-loans-101.com |
